Russia’s invasion of Ukraine is threatening shockwaves through two of the world’s staple grain markets, prompting countries that rely on imports from the region to start seeking alternative supplies and heightening concerns about global food inflation and hunger.
World Trade Organisation chief Ngozi Okonjo-Iweala warned Friday about the "economic impacts" of the war in Ukraine, a major wheat exporter, which will hurt consumers around the world.
"There's going to be a big impact with respect to wheat prices and prices of bread for ordinary people as well," she said at a virtual event with IMF chief Kristalina Georgieva.
Ngozi noted that Ukraine "is one of the largest wheat exporters of the world."
Georgieva echoed her previous warnings about the "significant economic risk" of the conflict for the global recovery from the Covid-19 pandemic, saying "the impact is going to go beyond Ukraine." She highlighted the added pressure on inflation which is likely to accelerate amid rising prices for energy and wheat.
Grain exports from Russia will probably be on hold for at least the next couple of weeks. Ukrainian ports have been closed since Thursday. That means the war has temporarily cut off a breadbasket that accounts for more than a quarter of global wheat trade and nearly a fifth of corn. Major importers are already looking at their options to buy from elsewhere, and prices for both grains have swung wildly in the past two days.
The disruptions come at a time when global crop prices have already soared to records, while global hunger has surged dramatically in the past two years.
Russia and Ukraine supply crops to a long list of countries around the world, including large volumes to buyers in the Middle East and Africa, who will have to look elsewhere and probably pay more for both the grain itself and the cost of shipping.
Reflecting global economic uncertainty, oil prices on Thursday briefly topped US$100 for the first time since 2014.
The United States and Europe have slapped sanctions on Moscow, targeting the financial sector but largely sparing the oil and agriculture sectors for now in an effort to mitigate the impact on their own people.
The sanctions "add to the economic impact of this crisis, and will transmit primarily through energy prices, as well as grain prices, adding to what has been a growing concern of inflation and how it can be countered," Georgieva said.
The conflict adds to the "high uncertainty" about the global economy that also is reflected in financial markets, and undermines confidence in other emerging markets causing an exodus of capital at a time when those countries need more funding.
"We see outflows from emerging markets when we need exactly the opposite," she said.